DAR File No. 43264

Tax Commission, Auditing

Section R865-19S-122

Sales and Use Tax Exemptions for Certain Purchases by a Web Search Portal Establishment Pursuant to Utah Code Ann. Section 59-12-104

Notice of Proposed Rule

(Amendment)

DAR File No.: 43264
Filed: 10/15/2018 10:56:30 AM

RULE ANALYSIS

Purpose of the rule or reason for the change:

These amendments to this rule reflect statutory changes pursuant to S.B. 2001 passed during the 2018 Second Special Session.

Summary of the rule or change:

These proposed amendment eliminate reference to machinery and equipment having an economic life of three or more years, and clarify that "parts and materials" are treated the same as machinery and equipment for purposes of the exemption from sales and use tax.

Statutory or constitutional authorization for this rule:

• Section 59-12-104

Anticipated cost or savings to:

the state budget:

These proposed amendments are not expected to have any fiscal impact on state government revenues or expenditures because any fiscal impact would have been addressed in the fiscal note for S.B. 2001 (2018).

local governments:

These proposed amendments are not expected to have any fiscal impact on local governments revenues or expenditures because any fiscal impact would have been addressed in the fiscal note for S.B. 2001 (2018).

small businesses:

These proposed amendments are not expected to have any fiscal impact on small businesses revenues or expenditures because any fiscal impact would have been addressed in the fiscal note for S.B. 2001 (2018).

persons other than small businesses, businesses, or local governmental entities:

These proposed amendments are not expected to have any fiscal impact on the revenues or expenditures of other persons because any fiscal impact would have been addressed in the fiscal note for S.B. 2001 (2018).

Compliance costs for affected persons:

These proposed amendments eliminate reference to machinery and equipment having an economic life of three or more years, and clarify that "parts and materials" are treated the same as machinery and equipment for purposes of the exemption from sales and use tax. These proposed amendments are not expected to impose any compliance costs on affected persons because any regulatory burdens would have been addressed in the fiscal note for S.B. 2001 (2018).

Comments by the department head on the fiscal impact the rule may have on businesses:

The fiscal impact this rule may have on businesses would have been addressed in the fiscal note for S.B. 2001 (2018).

Rebecca Rockwell, Commissioner

The full text of this rule may be inspected, during regular business hours, at the Office of Administrative Rules, or at:

Tax Commission
Auditing
210 N 1950 W
SALT LAKE CITY, UT 84134

Direct questions regarding this rule to:

• Jennifer Franklin at the above address, by phone at 801-297-3901, by FAX at , or by Internet E-mail at [email protected]

Interested persons may present their views on this rule by submitting written comments to the address above no later than 5:00 p.m. on:

12/03/2018

This rule may become effective on:

12/10/2018

Authorized by:

Rebecca Rockwell, Commissioner

Appendix 1: Regulatory Impact Summary Table*

Fiscal Costs	FY 2019	FY 2020	FY 2021
State Government	$0	$0	$0
Local Government	$0	$0	$0
Small Businesses	$0	$0	$0
Non-Small Businesses	$0	$0	$0
Other Person	$0	$0	$0
Total Fiscal Costs:	$0	$0	$0
Fiscal Benefits
State Government	$0	$0	$0
Local Government	$0	$0	$0
Small Businesses	$0	$0	$0
Non-Small Businesses	$0	$0	$0
Other Persons	$0	$0	$0
Total Fiscal Benefits:	$0	$0	$0
Net Fiscal Benefits:	$0	$0	$0

 

*This table only includes fiscal impacts that could be measured. If there are inestimable fiscal impacts, they will not be included in this table. Inestimable impacts for State Government, Local Government, Small Businesses and Other Persons are described above. Inestimable impacts for Non-Small Businesses are described below.

 

Appendix 2: Regulatory Impact to Non-Small Businesses

These rule changes are not expected to have any fiscal impact on non-small businesses' revenues or expenditures, because any fiscal impact would have been addressed in the fiscal note for S.B. 2001 (2018).

 

Commissioner of the Utah State Tax Commission, Rebecca L. Rockwell, has reviewed and approved this fiscal analysis.

 

 

R865. Tax Commission, Auditing.

R865-19S. Sales and Use Tax.

R865-19S-122. Sales and Use Tax Exemptions for Certain Purchases by a Web Search Portal Establishment Pursuant to Utah Code Ann. Section 59-12-104.

(1) [Definitions.

(a) ]"Establishment" means a unit of operations, that is generally at a single physical location in Utah, where qualifying activities are performed. If a business operates in more than one location (e.g., branch or satellite offices), each physical location is considered separately from any other locations operated by the same business.

[(b) "Machinery and equipment" means electronic or mechanical devices having an economic life of three or more years including any accessory that controls the operation of the machinery and equipment.

(c) "New or expanding establishment" means:

(i)(A) the creation of a new web search portal establishment in this state; or

(B) the expansion of an existing Utah web search portal establishment if the expanded establishment increases services or is substantially different in nature, character, or purpose from the existing Utah web search portal establishment.

(ii) The operator of a web search portal establishment who closes operations at one location in this state and reopens the same establishment at a new location does not qualify as a new or expanding establishment without demonstrating that the move meets the conditions set forth in Subsection (1)(c)(i).]

(2) The exemption for certain purchases by a web search portal establishment does not apply to purchases of items of tangible personal property that become part of the real property.

(3) Purchases of qualifying machinery,[and] equipment, parts, and materials are treated as purchases of tangible personal property under R865-19S-58, even if the item is affixed to real property upon installation.

(4) Machinery,[and] equipment, parts, and materials used for non-qualifying activities are eligible for the exemption if the machinery,[and] equipment, parts, and materials are primarily used in qualifying activities.

(5) The entity claiming the exemption shall retain records to support the claim that the machinery,[ and] equipment, parts, and materials are qualified for exemption from sales and use tax under the provisions of this rule and Section 59-12-104.

 

KEY: charities, tax exemptions, religious activities, sales tax

Date of Enactment or Last Substantive Amendment: [December 8, 2016]2018

Notice of Continuation: November 10, 2016

Authorizing, and Implemented or Interpreted Law: 9-2-1702; 9-2-1703; 10-1-303; 10-1-306; 10-1-307; 10-1-405; 19-6-808; 26-32a-101 through 26-32a-113; 59-1-210; 59-12; 59-12-102; 59-12-103; 59-12-104; 59-12-105; 59-12-106; 59-12-107; 59-12-108; 59-12-118; 59-12-301; 59-12-352; 59-12-353